Optionvox
® uses option trading as a prediction market. Implied future stock prices are computed from current call and put option data at quarterly expiry dates using optimization. Then annualized volatility is estimated using nonparametric statistics.
This volatility measure gives a quantity based on complete current data, whereas implied volatility from the Black-Scholes formula varies from trade to trade, and historical measures of volatility use old information.
Estimates are updated twice weekly.
- annualized volatility: standard deviation of one-year log-returns
- call option: a contract giving the buyer the option to purchase a share of stock at a specified strike price before the expiry date
- put option: a contract giving the buyer the option to sell a share of stock at a specified price before the expiry date
- prediction market: a market for trading on the outcome of an event
